Contractual Terms of a Contract
In a contract, the contents are known as either terms or clauses. The terms of a contract are the main subject matter of what the contract is, for example the price of the services rendered or the goods provided. These terms may be express or implied and they can be classified as either conditions, warranties or innominate terms.
The Terms agreed between the parties themselves. If they are not fulfilled, an action can be brought forth for breach of contract.
The terms which are put into a contract by the courts or statutes.
Conditions, Warranties and Innominate Terms:
In a contract, contractual terms are classified as either conditions, warranties or innominate terms. Traditionally, terms within a contract were classified as either conditions or warranties. The case of Hong Kong Fir Shipping created what is now known as innominate terms.
It is very important for parties to a contract to correctly identify the classification of terms. If there is a breach of contract, the determination of which type of term as been breached establishes the appropriate remedy available.
This type of term is the main concern of the contract. If a condition is breached, the innocent party is entitled to repudiate, i.e. end the contract and claim appropriate damages.
This type of term is opposite of a condition it is a very minor term of the contract which is not necessarily central to the existence of the contract. If a warranty is breached, the contract does not end but a party may claim damages.
As established in Hong Kong Fir Shipping, the innominate term approach looks at the effect of the breach of contract and whether or not the innocent party was deprived of the whole benefit of the contract. Rather than classifying the term, if the party was substantially deprived then the contract may come to an end.
Note: This Approach lacks certainty because it is up to the court to determine if the whole benefit of the contact was deprived by the innocent party. A party may classify the term as a condition for example, but the court may hold that it was only a minor term and therefore the contract may not come to an end.
Innominate Terms and the lack of certainty it brings causes issues with commercial contracts. There is more of a need for certainty in these types of contracts. (See Bunge Corporation v Tradax)